thoughts and scraps of innovation, technology, evolution and life by Peter Woodford

Thursday, July 12, 2007

Behavioral Advertising on Target... to Explode Online

Behavioral Advertising on Target... to Explode Online

JUNE 11, 2007

Brand advertising is moving onto the Internet.

After years of deriding the Internet as "only" a direct advertisingvehicle, major brand marketers are discovering powerful new ways totarget their users online, and major online players are clearlynoticing.

"Nearly $10.5 billion sends a very clear message about futurestrategies," says David Hallerman, eMarketer Senior Analyst and theauthor of the new eMarketer report, Behavioral Targeting: AdvertisingGets Personal." "Four deals in 35 days - Google-DoubleClick,Yahoo!-Right Media, WPP Group-24/7 Real Media and Microsoft-aQuantive- are a clear indication of the onrush of brand-focused advertisersonto the Web."

Internet advertising is no longer all about paid search. Targetedonline display advertising is exploding.

Spending for Internet advertising with a behavioral targetingcomponent will soar from $575 million this year to $1 billion in 2008,and that still represents only 11% of the US display, rich media andvideo market.

"With the greater attention paid to overall ad targeting, and therising focus on brand messages online," says Mr. Hallerman, "thismarket will nearly quadruple by the end of 2011, growing to $3.8billion."

2. Behavioral targeting helps publishers monetize their "longtail" pages - the non-premium or remnant inventory that either is soldfor less money or remains unsold

3. Even though individuals are often not aware of the process,many tend to find ads targeted by their actions to be more relevant totheir needs, and therefore more palatable or even welcomed

"The eMarketer outlook for behavioral targeting is optimistic," saysMr. Hallerman, "but not overly so, since the scalability required forsubstantially larger spending is simply not there yet."

Scalability involves several factors, including the broad reach amongWeb sites - both through portals and ad networks - needed to allowfine-tuned segmenting and yet maintain a reasonable size for eachslice of the audience.

"Another element holding back behavioral targeting's growth is thetechnology itself, which despite its benefits still seemscounterintuitive to many advertisers," says Mr. Hallerman. "That theyneed to pay nearly the same rate for a remnant page as they would fora contextually targeted page placement goes against the grain."

Nevertheless, behavioral targeting spending will continue to grow at asignificant rate, peaking at nearly 74% next year due to a combinationof greater advertiser acceptance, greater publisher support (onlyabout one-third of Web sites can do behavioral targeting, according toAdvertising.com) and greater overall online ad spending with thenational elections and Summer Olympic Games.

By 2011, "very large publishers will be selling 30% to 50% of their adinventory using this [behavior targeting] technique," predicts BillGossman, CEO of Revenue Science.